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'Populist ire' keeps Bernanke short of needed Senate votes

January 25, 2010 | 6:42
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Federal Reserve Chairman Ben S. Bernanke’s confirmation to a second four-year term, seemingly a slam dunk just a few weeks ago, now has become a true battle royal.

Although Democratic Sens. Dianne Feinstein of California and Max Baucus of Montana gave their support to Bernanke today, the latest Wall Street Journal tally showed that the Fed chief still was 20 votes shy of the 60 needed to be reconfirmed (specifically, to avoid a potential filibuster blocking his confirmation vote).

Everything changed when the Democrats lost the late Ted Kennedy’s Senate seat to Republican Scott Brown last week. Suddenly, populism is raging -- and Bernanke is a convenient target for Democrats, Republicans and Independents alike. Sen. Bernie Sanders (I-Vt.), in a letter to other senators today, accused Bernanke of being “asleep at the wheel while Wall Street became the largest gambling casino in the history of the world.”

Bernanke’s term expires on Sunday. Even if he were to lose the chairmanship he would remain on the Fed board unless he decided to walk away altogether: His term as a member of the board doesn’t expire until 2020.

President Obama again endorsed Bernanke in an interview with ABC News today. “He has my strongest support,” Obama said. “What we need is somebody at the Federal Reserve who can make sure that the progress that we've made in stabilizing the economy continues. And I think Bernanke is the best person for that job.”

Some senators may be waiting to see if the Fed chief’s image takes another hit at a House hearing on Wednesday on the central bank’s 2008 bailout of insurance giant American International Group. The hearing will focus in part on whether the Fed tried to hide details of the bailout, which directly benefited Goldman Sachs Group, French banking giant Societe Generale and other big creditors of AIG.

Bernanke won’t be testifying in front of the House Oversight and Government Reform Committee, but Treasury Secretary Timothy F. Geithner will. Geithner was head of the New York Fed bank at the time of the AIG bailout.

The hearing “could turn into a referendum on [Bernanke] ahead of the vote” by the Senate, Wall Street advisory firm Strategas Research Partners told clients in a note today.

Geithner on Friday played the market-turmoil card, saying in an interview with Politico that he believed the financial markets would view a Senate rejection of Bernanke as “a very troubling thing to the economy as a whole.”

Major stock indexes fell between 2% and 3% on Friday amid rising chatter that Bernanke’s confirmation was in trouble. Today the stock market stabilized, with the Dow Jones industrial average edging up 0.2% to 10,196.86.

Geithner’s market-turmoil threat infuriated Paul Krugman, among others. "Nobody really knows how the markets will react," Krugman wrote on his blog. "The right thing, always, is to pursue policies that look right on the substance."